News

October 08, 2008

Aricom Takes To The Trans-Siberian Railway To Keep Down Costs, As It Delivers Full Feasibility Studies On Its Sizeable Russian Iron Ore Projects

By Alastair Ford

“The key question”, reads a recent broker report on Aricom, “one that is difficult to answer with certainty at this stage”, but that’s “driving the outlook for the company, is the level of capex inflation”. Aricom addressed that question head on today, with the announcement of an updated feasibility study on the development of iron ore production operations at its K&S and Garinskoye projects in the Far East of Russia. Capex, said Aricom’s chief executive Jay Hambro, had been projected at around US$1.3 billion last year, and in spite of the industry-wide cost inflation, that’s where it’s staying. It’ll still take US$1.3 billion to get K&S and Garinskoye up and running and producing lots of lovely iron ore, which the company will be able to ship, after a certain amount of beneficiation, at minimal cost to the Chinese just over the border to the south.

Those numbers are supported by studies from Hatch and Wardell Armstrong, and have been kept low partly by the decision not to build a separate sophisticated beneficiation and pig iron production operation at Garinksoye, but rather to use the nearby Trans-Siberian to deliver ore over to the K&S project for processing there. The Garinskoye ore would in any case have passed K&S on its way for export to China, and although the mass of ore being transported to K&S will be about 10 per cent greater,...